EXCLUSIVE: James Franco will star with Winona Ryder in The Stare, a Jay Anania-directed film that is the first project funded by Waterstone Entertainment, a new producing/financing company formed by producer Jeff Kalligheri and Texas real estate developer and producer Steve Bowen.

Waterstone intends to generate projects it develops and has several other projects percolating, including two that will be produced by Franco (one he’ll direct) and his Rabbit Bandini partner Vince Jolivette. Waterstone’s core business will be to build a distribution business through a partnership it will strike with an independent distributor, Kalligheri said. Waterstone will put up minimum guarantees on films, and will also be looking for structured finance opportunities on films that are in the works. Kalligheri said he will be meeting with potential strategic partner distributors at Cannes, with Waterstone repped by Gersh’s head of Packaging and Finance, Jay Cohen. Bowen has funded several projects but no hits and is looking to step it up. Kalligheri had most recently been president of production at Queen Nefertari Productions, which had been been developing Adrenaline for Entourage’s Kevin Connolly to direct.

Watersone gets started with The Stare, a drama in which a playwright (Ryder) finds her mind beginning to warp as she struggles to launch her next production. She’s plagued by dreams and visions of being watched, but can’t decide if she’s at the center of a manipulative plot or simply losing her grip on reality. Franco plays one of the performers in the playwright’s production. The film will shoot May 6 in New York. Franco is producing with Jolivette, with Kalligheri exec producing with Steven Garcia, Rich Hill and Eric Amadio. Franco previously starred in Shadows and Lies for the film’s writer-director Anania, a teacher of Franco’s who heads the directing program at the graduate film school at NYU. Franco’s repped by CAA, Ryder by Gersh.